Updated: Aug 9, 2022
You may have heard the phrase “build it and they will come”. In business, this does not work. When you don’t research your ideas with someone who might buy it, you are only assuming it’s a good business idea.
Thousands of businesses are started each year based upon a "hunch" that an idea will be successful. This approach rarely works. As a matter of fact, the two most common reasons for business failure is:
1) Lack of cash flow
2) lack of a valid business idea
Actually, a lack of cash is a symptom of a poor business idea. No customers = no cash.
So, how do you create a valid business idea? I am glad you asked.
Let’s start with defining what a valid business idea looks like. I like to call it a Winning Business Idea. There are 3 components to be a valid business idea:
Target Audience + Problem to Solve + Business Model
First, you need someone to sell your product or service to. That is your target audience. This is a group of people or businesses that desire to solve a problem and are willing to pay for a solution. The key point is they must desire to solve it. It is very important to know how to find that audience.
Next, there needs to be a problem to solve or the desired outcome. Without a problem to solve, there is no need to go any further. You can’t make up a problem. That mistake is made every day. You can’t sell something if you invent a problem. If your assumed market has no desire to solve a problem then you are creating the idea based upon a hunch.
Last, you need to have a business model to deliver and manage the processes that provide your products or services to the marketplace. The common term for the business model is, “platform”. Business models are typically web-based, “brick and mortar” or a hybrid of the two.
Once you have discovered the “who”, “what” and “how” of a business idea, you can begin presenting your solution to your target audience. This can be in the form of a preliminary or beta version of your solution. It is used to present and collect feedback from your target audience.
This process is referred to as an MVP (Minimal Viable Product). It was first presented by Eric Ries in his book, “The Lean Startup”. He talks about following the structured approach that includes a target audience, a problem to solve, and a process to validate a minimum version of a solution using a target audience. To be successful, you need your target audience to be involved in the “building” process before it is released to the marketplace.
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